Most Irish firms not investing in R&D long term – survey

21 Feb 2012

More than half (58pc) of companies across Ireland have failed to make a long-term investment in the research and development of new ideas, services and products, a survey by IT consultancy Choose Portal suggests.

The survey of 200 companies, published as a whitepaper, Innovation: the first casualty of a downturn, asked whether the firms had increased, decreased or maintained spending on research and development (R&D) since the recession began in 2008.

The results show that 59.5pc of Irish companies spend less than 2pc of their revenues on R&D and 35pc of companies spend absolutely nothing on innovation. This is despite the fact 59pc of survey respondents recognise that R&D can help maintain or grow market share.

Thirty per cent of survey respondents said they have reduced their investment levels since 2008.

Three-quarters (75.5pc) of companies spend less than 10 hours a month on innovation, assuming they adhere to a 35-hour week and a 48-week working year. That translates to less than 1.5pc of company time spent on R&D.

However, the finding of 58pc of respondents having maintained pre-recession spending points to a long-term failure to invest in R&D and a reason why Ireland may lag behind many of its European counterparts when it comes to innovation.

“Whether it’s the development of new products or new internal processes, investing in the research and development process is critical for long-term business success,” said Tony Egerton, sales and marketing director at Portal.

“Cutting R&D investment might seem like a good idea in today’s economic environment but it’s a corporate version of cutting your nose to spite your face and is only going to be bad news for companies that think it’s a rational business strategy.”

Why Irish companies are not investing in R&D

There are several reasons why companies are not investing in R&D, which include lack of funds and perceived difficulty in the process of applying for sufficient resources.

Survey respondents cited three major process challenges:

Creating a collaborative environment – innovation does not just happen; it requires an environment in which it can flourish.

Finding the right people – for many companies, particularly those with multiple sites, knowing what skills the workforce has, whether they are part of current job descriptions or not, is an almost impossible job.

Keeping the team collaborating – ‘day jobs’ get in the way of special projects so keeping everyone focused and collaborating on the innovation process is a major challenge for companies.

The survey also revealed that 66pc of respondents would invest more in R&D if the Government offered tax incentives, even though the Irish Government has implemented a R&D Tax Credit.